ASSET PURCHASE AGREEMENT
This
ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of
December 31, 2008 and effective as of November 30, 2008, is by and between JDCO,
Inc., a California corporation (“Seller”) and Java NorCal,
LLC, a California limited liability company (“Buyer”).
WHEREAS,
Seller is engaged in the business of selling gourmet coffees, whole leaf teas
and other beverages through a Seller-owned retail store in Marysville,
California (the “Marysville
Business”) located at 000 0xx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxx, 00000 (the “Marysville Business Facility”)
and a Seller-owned retail store in Yuba City, California (the “Yuba City Business”) located
at 000 Xxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 (the “Yuba City Business Facility” and
together with the Marysville Business Facility, the “Business Facilities”),
collectively (the “YM
Business”);
Article
1.
Subject
to the terms and conditions of this Agreement, Seller shall grant, convey, sell,
assign, transfer, and deliver to Buyer on the Closing Date (as defined in
Section 2.1 herein), and Buyer shall purchase on the Closing Date, free and
clear of all covenants, restrictions, liens, security interests, claims,
pledges, assignments, subleases, options, rights of refusal, charges, leases,
licenses, encumbrances and any other restriction of any kind or nature
(collectively, “Liens”),
all properties, assets, privileges, rights, interests and claims, real and
personal, tangible and intangible, of every type and description, wherever
located, including the YM Business as a going concern and goodwill, that are
owned, used, or held for use by Seller and related to the YM Business, except
for those assets which are expressly excluded pursuant to Section 1.2 hereof
(collectively, the “Assets”) Without limiting the
generality of the foregoing, the Assets shall include, without limitation, items
in the following categories that conform to the definition of the term
“Assets”:
(a) Inventories. All
inventories (including raw materials, work-in-progress, and finished good) and
supplies of Seller (collectively, the “Inventory”) held at the
Business Facilities including all inventories held at YM Business storage
units;
(b) Prepaid Items. All
prepaid items and expenses;
(c) Machinery, Equipment, and Other
Personal Property. All physical assets, machinery, equipment,
furniture, fixtures, office materials and supplies, computer hardware and
software, spare parts, and other tangible personal property of every kind and
description owned, leased, or licensed by Seller and used or held for use in
connection with the YM Business as set forth on Schedule
1.1;
(d) Real
Property. Seller’s interest in all of the leaseholds,
including but not limited to Seller’s rights to any and all deposits or refunds
at termination and to any improvements made to leasehold by Seller, and other
estates in real property and appurtenances thereto, leased or owned by Seller
and used or held for use in connection with the YM Business (collectively, the
“Business Real
Properties”);
(e) Contracts. Seller’s
rights under all contracts, leases, licenses, indenture, agreements, whether
oral or written, express or implied, including rights to any deposits or refunds
at termination as set forth on Schedule 1.1(e)
(collectively, the “Assumed Contracts”);
(f) Files and
Records. All files, records, books of account, general,
financial, and accounting records, invoices, computer programs, tapes,
electronic data processing software, customer and supplier lists,
correspondence, and other records of Seller;
(g) Permits, Licenses and
Authorizations. All governmental permits, licenses and
authorizations held by Seller listed on Schedule 1.1(g) to
the extent the same may be transferred to Buyer;
(h) Guaranties. All
guaranties, warranties, indemnities, and similar rights in favor of Seller with
respect to the YM Business or any of the Assets;
(i) Asset List. Those
items listed on the asset list attached as Schedule 1.1(i)
hereto; and
(j) Goodwill. Seller’s
goodwill in, and the going concern value of, the YM Business.
Notwithstanding
the foregoing, Seller shall retain, and the Assets shall not include, any assets
of Seller not specifically identified in Section 1.1 above. The
Assets shall not include, and
nothing in this Agreement shall be construed as an attempt to assign, any
contract or agreement that is by its terms nonassignable without the consent of
the other party or parties thereto, unless such consent shall have been given
(“Excluded
Assets”).
All
debts, liabilities, taxes, claims, costs and expenses of or against Seller,
including but not limited to all accounts payable balances and any accrued
payroll incurred or arising prior to the Closing Date shall be the
responsibility of Seller. Buyer does not hereby and shall not assume
or in any way undertake to pay, perform, satisfy or discharge any obligation or
liability of any nature or kind whatsoever of Seller, whether arising before, on
or after the Closing Date the (“Retained Liabilities”) except
that Buyer shall assume and agree to pay, perform and discharge when due those
liabilities and obligations of Seller that accrue from and after and relate
solely to the period after the Closing Date under the Assumed Contracts and such
liabilities shall not constitute Retained Liabilities. Seller shall
pay and satisfy when due all Retained Liabilities.
(a) Purchase
Price. Buyer shall purchase the Assets for an aggregate
purchase price of One-million, Four-Hundred and Fifty-Five Thousand Dollars
($1,455,000), in accordance with the terms and subject to the conditions set
forth in this Agreement including, without limitation, the post-Closing
adjustment as provided in Section 1.6 below (the “Purchase Price”).
This
Purchase Price will include five (5) Franchise Fees of $28,500 for a total of
$142,500 which will be applied against the franchise fees for the YM Business
($57,000) and as a credit of $28,500 to Buyer upon signing its third Franchise
Agreement for store number three, as a credit of $28,500 to Buyer upon signing
its fourth Franchise Agreement for store number four and as a credit of $28,500
to Buyer upon signing its fifth Franchise Agreement for store number
five. If Buyer does not open any franchises other than the franchises
for the YM Business before six months from the date hereof, all unused credits
for franchise fees will expire. Additionally the Purchase Price will
include two-years of pre-paid royalty’s of $2,000 per month per store for a
total of $96,000.
(b) Payment of Purchase
Price. An amount equal to the Purchase Price, as calculated
using Schedule
4.4, shall be paid at Closing by wire transfer in immediately available
funds to Seller pursuant to written instructions provided by
Seller. The entire remaining Purchase Price shall be paid by Buyer to
Seller by a Promissory Note attached hereto as Exhibit E.
The
Purchase Price shall be allocated among the Assets in accordance with the
allocations set forth in Schedule
1.5. To the extent consistent with law, Buyer and Seller shall
report the federal, state and local income and other tax consequences of the
purchase and sale contemplated hereby in a manner consistent with such
allocation and none of them shall take any position inconsistent therewith upon
examination of any tax return, in any refund claim, in any litigation, or
otherwise.
At the time of closing and out of the
purchase price, the Seller will pay $30,000 to the Buyer to use as working
capital and to pay for deferred maintenance for the buildings, equipment and
signage of the Business Facilities. The Buyer will, at Buyer’s
expense, (a) order within 60 days of the Closing Date a new monument sign
and directional signs for the Yuba City and Marysville stores and
(b) within 150 days of the Closing Date, slurry seal both
store parking lots and repair pavement where needed; provided that, Buyer shall
only be required to spend up to $15,000 on items (a) and (b). The final new sign
design must be approved by Seller prior to installation.
The Buyer
shall pay the Seller 4% of Monthly Net Sales from the Yuba City Business and
Marysville Business by the fifteenth of each month except for the first two
years which will be paid by a fixed amount of $2,000 (two thousand dollars) per
month per store. Both parties agree that the Purchase Price includes pre-paid
royalty payments for the first two years (24 months) of $2,000 per month per
store for a total of $96,000 (ninety six thousand dollars). The first royalty
payment of 4% for each store will therefore be due Jan 15, 2011 which would
cover net sales from December, 2010 for each store.
Article
2.
The closing of the sale and transfer of
the Assets (the “Closing”) and the
consummation of the other transactions contemplated by this Agreement shall take
place on or before November 30, 2008 (the “Closing Date”), or at such
other place and time as the parties may agree upon in writing.
(a) Conditions Precedent to Obligation of
Buyer. The obligation of Buyer to proceed with the Closing is
expressly subject to the fulfillment prior to or at Closing of the conditions
precedent set forth in this Section 2.2(a). Any one or more of these
conditions precedent may be waived, in whole or in part, in writing by Buyer at
Buyer’s sole option.
(i) Representations and
Warranties. The representations and warranties of Seller
contained in Article 4 shall be, individually and collectively, true and correct
(in the case of any representation or warranty containing any materiality
qualification) or true and correct in all material respects (in the case of any
representation or warranty without any materiality qualification) (i) at and as
of the date of this Agreement and (ii) on and as of the Closing Date as if made
on the Closing Date.
(ii) Agreement. Seller
shall have performed in all material respects all of the agreements and complied
with all of the provisions required by this Agreement and the Seller Transaction
Documents to be performed or complied with by such party at or before the
Closing Date.
(iii) Legal
Proceedings. No order of any governmental body shall be in
effect that restrains or prohibits the transactions contemplated hereby, and to
Seller’s knowledge, there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any governmental body challenging
the lawfulness of or seeking to prevent or delay any aspect of this transaction
or seeking monetary or other relief by reason of the consummation of any of such
transactions.
(iv) Financing. Buyer
shall have secured financing, the terms of which are acceptable to Buyer in its
sole discretion, to finance the transactions contemplated by this
Agreement. If Buyer is unable to secure financing, this Asset
Purchase Agreement is terminated.
(v) Unencumbered
Title. Buyer shall have received copies of such releases and
documents, and reviewed other such evidence as Buyer deems necessary to assure
Buyer that the Assets are being delivered free and clear of all liens and
encumbrances.
(vi) Landlord
Consent.
(a) Landlord
Consent. The Landlord (as defined below) under the Marysville
Lease (as defined below) shall have consented in writing to assignment of such
lease to Buyer as contemplated by this Agreement and acknowledged and agreed in
writing that Seller has the authority to assign the Marysville Lease in its
entirety with Xxxxxx Xxxxxxxxx and Xxxxxxx Xxxxxxxxx having previously assigned
their interests in such lease to Seller.
(b) Landlord
Consent. The Landlord (as defined below) under the Yuba City
Lease (as defined below) shall have consented in writing to assignment of such
lease to Buyer as contemplated by this Agreement and acknowledged and agreed in
writing that Seller has the authority to assign the Yuba City Lease in its
entirety with Seller having previously assigned their interests in such lease to
Buyer.
(vii) Attorney
Review. Buyer’s attorney shall have had an opportunity to
review and consent to Buyer’s consummation of the transactions contemplated
under this Agreement, such consent not to be unreasonably withheld.
(viii) Required
Authorizations. Seller and Buyer shall have received all
required authorizations under any applicable law necessary to consummate the
transactions contemplated by this Agreement.
(ix) Closing
Documents. Buyer shall have received the other agreements and
documents referred to in Section 2.3(a).
(b) Conditions Precedent to Obligation of
Seller. The obligation of each Seller to proceed with the
Closing is expressly subject to the fulfillment prior to or at Closing of the
conditions precedent set forth in this Section 2.2(b). Any one or
more of these conditions may be waived, in whole or in part, in writing by any
Seller at the sole option of such Seller
(i) Representations and
Warranties. The representations and warranties of Buyer
contained in Article 5 shall be, individually and collectively, true and correct
(in the case of any representation or warranty containing any materiality
qualification) or true and correct in all material respects (in the case of any
representation or warranty without any materiality qualification) (i) at and as
of the date of this Agreement, and (ii) on and as of the Closing Date as if made
on the Closing Date.
(ii) Agreements. Buyer
shall have performed in all material respects all of the agreements and complied
with all of the provisions required by this Agreement to be performed or
complied with by it at or before the Closing Date.
(iii) Legal
Proceedings. No order of any governmental body shall be in
effect that restrains or prohibits the transactions contemplated hereby, and
there shall not have been threatened, nor shall there be pending, any action or
proceeding challenging any of the transactions contemplated by this Agreement
seeking monetary relief by reason of the consummation of such
transactions.
(iv) Closing
Documents. Seller shall have received the documents and other
items referred to in Section 2.3(b).
(v) Tax Clearance
Certificates. Seller shall
obtain tax clearance certificates from the California Employment Development
Department and the Board of Equalization evidencing that all payroll and sales
taxes are paid.
(a) Deliveries by Seller. At Closing,
Seller shall deliver to Buyer:
(i)
The Assets.
(ii)
A certification that all third party debt and obligations of Seller related to,
or that is secured by, the Assets has been paid in full.
(iii)
A certification that any and all obligations of Seller related to, or that is
secured by, any equipment being acquired by Buyer pursuant to Section 1.1(c) has
been paid in full.
(iv)
A certification that any and all liens on the Assets have been released and all
financing statements terminated.
(v) An
executed Xxxx of Sale (the “Xxxx of Sale”) in
substantially the form of Exhibit A attached
hereto.
(vi-a) An
executed single-unit franchise agreement for the Marysville Business, (the
“Maryville Franchise
Agreement”) in substantially the form of Exhibit C attached
hereto.
(vii-b) An
executed single-unit franchise agreement for the Yuba City Business (the “Yuba City Franchise Agreement” and
together with the Maryville Franchise Agreement, the “Franchise Agreements”) in
substantially the form of Exhibit D attached
hereto.
(vii) Seller
shall have delivered a certificate executed by an officer of Seller, dated as of
the Closing Date, certifying to the fulfillment of the conditions set forth in
subsections (i), (ii) and (iii) of Section 2.2(a).
(viii) Tax Clearance
Certificates. Seller shall furnish to Buyer appropriate
clearances from the California Employment Development Department for employee
tax clearances and the Board of Equalization for sales tax
clearances.
(b) Deliveries by Buyer. At Closing, Buyer shall
deliver to Seller:
(i-a) An
executed single-unit franchise agreement for the Marysville Business, (the
“Maryville Franchise
Agreement”) in substantially the form of Exhibit C attached
hereto.
(i-b) An
executed single-unit franchise agreement for the Yuba City Business (the “Yuba City Franchise Agreement” in
substantially the form of Exhibit D attached
hereto.
(ii) Buyer
shall have delivered a certificate executed by its manager, dated as of the
Closing Date, certifying to the fulfillment of the conditions set forth in
subsections (i), (ii) and (iii) of Section 2.2(b).
Article
3.
From and
after the date hereof and until the Closing Date, unless the Buyer shall
otherwise consent in writing, Seller shall conduct the affairs of the YM
Business in the ordinary course and consistent with past
practice. Seller shall take reasonable actions to maintain the YM
Business’ property, equipment and other assets in substantially the same
condition as such assets existed on the date of this Agreement and consistent
with past practice and shall, subject to available resources, comply in a timely
fashion with the provisions of all the Assumed Contracts and its other
agreements and commitments. Further, Seller shall not incur
additional debt (including, without limitation, any capital lease obligations)
through the Closing without the prior written consent of Buyer.
Seller
and Buyer acknowledge and agree that in the event that Seller shall desire to
sell its interest in its company-owned retail store currently 000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000 (the “Auburn Store,” Seller shall
grant Buyer a right of first refusal to purchase such store; provided, that Buyer
shall have sixty (60) days from receipt of notice from Seller in which to elect
to exercise such right to purchase the Offered Store; provided, further that Buyer’s
right shall either be exercised or canceled upon the expiration of such sixty
(60) day period as it applies to each Offer unless the parties mutually agree
otherwise in writing.
Seller
and Buyer acknowledge and agree that in the event that Seller or any affiliate
or principal of Seller shall desire to acquire the premises located at 000
0xx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx, also known as Assessor’s Parcel Number
000-000-000 (the “Marysville
Property”) currently being leased pursuant to that certain Ground Lease
(the “Marysville Lease”)
dated as of November 5, 2002 by and between Xxxxxxx X. Xxxxx, Xx. and Xxxxx X.
Xxxxx (collectively, the “Landlord”), and Seller,
Xxxxxxx Xxxxxxxxx and Xxxxxx Xxxxxxxxx, Seller or any affiliate or principal of
Seller, as applicable, shall grant Buyer a right of first refusal to purchase
the Marysville Property from Landlord; provided, that Buyer
shall have thirty (30) days from receipt of notice from Seller in which to elect
to exercise such right to purchase the Marysville Property; provided, further that Buyer’s
right shall either be exercised or canceled upon the expiration of such thirty
(30)-day period unless the parties mutually agree otherwise in
writing.
Seller
and Buyer acknowledge and agree that in the event that Buyer shall desire to
sell its interest in its stores (the “Marysville Business”) located
at 000 0xx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxx, 00000 (the “Business Facility”) and (the
“Yuba City Business”)
located at 000 Xxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 (the “Business Facility”),
collectively (the “YM
Business”) Buyer shall grant Seller a right of first refusal to purchase
such stores at the same multiple of 4.75 times store level earnings before
interest, taxes, depreciation and amortization (EBITDA); provided, that Buyer
shall have sixty (60) days from receipt of notice from Seller in which to elect
to exercise such right to purchase the Offered Store; provided, further that Buyer’s
right shall either be exercised or canceled upon the expiration of such sixty
(60) day period as it applies to each Offered Store unless the parties mutually
agree otherwise in writing.
BUYER
AGREES AND ACKNOWLEDGES THAT IT HAS UNDERTAKEN AN INDEPENDENT REVIEW AND
ANALYSIS OF THE TERMS OF THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, THE
PURCHASE PRICE AND IT HAS NOT RELIED IN ANY WAY ON SELLER’S 2008 FINANCIAL
PROJECTIONS PREVIOUSLY PROVIDED TO BUYER IN NEGOTIATING THE TERMS OF THIS
AGREEMENT. BUYER FURTHER ACKNOWLEDGES THAT SUCH PROJECTIONS WERE ONLY
PROVIDED FOR THE SOLE PURPOSE OF DELIVERING INFORMATION REQUIRED IN ORDER TO
ALLOW BUYER TO SECURE FINANCING. BUYER ALSO ACKNOWLEDGES THAT SELLER HAS NOT
PROVIDED TO BUYER ANY TYPE OF FINANCIAL PROJECTION(S) FOR EITHER STORE IN ANY
MATTER OR FORM NEITHER WRITTEN NOR VERBAL NOR ELECTRONICALLY AT ANY
TIME.
(a) Remit Funds. After
the Closing, (i) Seller shall promptly transfer and deliver to Buyer any cash or
other property, if any, that Seller may receive related to the YM Business or
the Assets which was earned by the YM Business after the Closing; and (ii) Buyer
shall promptly transfer and deliver to Seller any cash or other property, if
any, that Buyer may receive related to the YM Business or the Assets which was
earned by the YM Business prior to the Closing.
(b) Assistance. Seller
shall cooperate with and assist Buyer and its authorized representatives in
order to provide, to the extent reasonably requested by Buyer, an efficient
transfer of control of the Assets, and to avoid any undue interruption in the
activities and operations of the YM Business following the Closing
Date. Such assistance shall include, among other reasonable requests,
assistance in retaining the customers of the YM Business for the benefit of
Buyer after the Closing Date. Buyer shall reimburse the party
providing assistance for direct out-of-pocket expenses incurred in providing
such assistance.
(c) Assignment of Assumed Contracts;
Consents. Seller shall use its best efforts prior to, and if
necessary after, the Closing Date, to obtain at the earliest practicable date
but no later than thirty (30) days after the Closing Date, the consent to the
assignment to Buyer of the Assumed Contracts which require consent to
assignment, without any conditions adverse to Buyer. To the extent
that such consents are obtained after the Closing Date, Seller shall keep the
applicable contracts in effect and shall give Buyer the benefit of such
contracts to the same extent as if they had been assigned and Buyer shall
perform the obligations under such contracts relating to the benefit obtained by
Buyer.
(d) Publicity. Buyer
shall consult with Seller before issuing any press release or otherwise making
any public announcements, including any announcement to employees, with respect
to this Agreement or the transactions contemplated hereby (except to the
respective directors and officers of Seller and Buyer), and shall not issue any
such press release or make any such public announcement prior to such
consultation and written consent of Seller, except as required by
law. Seller shall not make any press release or external public
announcement regarding this Agreement or the transactions contemplated hereby
without prior approval of the Buyer.
Article
4.
Seller
hereby represents and warrants to Buyer that all statements set forth in this
Article 4 are true and correct.
4.1 Organization.
Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California. Seller has the corporate power and
authority to operate, own and lease its properties and carry on its business as
now conducted. Seller has the absolute and unrestricted power,
authority and capacity to enter into this Agreement and any agreements related
hereto to which it is or is to become a party and perform its obligations under
this Agreement and such related agreements. Copies of the articles of
incorporation and bylaws of Seller, which have been delivered to Buyer, are
complete and correct.
This
Agreement and all agreements contemplated hereby to which Seller is a party have
been duly executed and delivered by such party and constitute the legal, valid
and binding obligations of such party, enforceable against it in accordance with
their respective terms. Seller has duly and validly authorized this
Agreement and all agreements contemplated hereby to which it is or is to become
a party and all of the transactions contemplated thereby.
Neither the execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby nor the
compliance with or fulfillment of the terms, conditions or provisions hereof by
Seller will: (i) result in a breach of, constitute a default or an event of
default under any of the terms of, or give to any other person the right to
cause a termination of, any of the Assets or any other contract to which Seller
is a party or by which its Assets may be bound, (ii) result in the creation,
maturation or acceleration of any liability of Seller, (iii) violate any law or
violate any judgment or order of any governmental body to which Seller is
subject or by which any of the Assets may be bound or affected, or (iv) result
in the creation or imposition of any Lien or encumbrance upon any of the Assets
or give to any other person any interest or right therein.
Seller has and is conveying good,
marketable and exclusive title to all of the Assets. None of the
Assets is subject to any Lien, encumbrance, impairment, burden or charge of any
kind or nature whatsoever, legal or equitable, or any item similar or related to
the foregoing. Seller warrants that the assets are in good working order or
condition and the assets sold under the Agreement are all of the material assets
needed to run the business. Schedule 4.4
identifies any outstanding liability in connection with the YM Business and the
Assets. The Assets being sold by the Seller pursuant to this
Agreement are less than one half of Seller's inventory and equipment, as
measured by the fair market value on the date hereof.
No action, suit, investigation, claim
or proceeding of any nature or kind whatsoever, whether civil, criminal or
administrative, by or before any governmental body or arbitrator is pending or,
to the knowledge of Seller, threatened against or affecting Seller, any of the
Assets or any of the transactions contemplated by this
Agreement. Seller does not have pending any litigation against any
third party related to the Assets.
Except as set forth on Schedule 4.6, no
consent of any third party is required for the transfer to Buyer of any of the
Assets, including the Assumed Contracts. Except as set forth on Schedule 4.6, the
assignment of each of the Assumed Contracts does not require the consent of any
third parties. To the extent that any of the Assumed Contracts
requires the consent of any third parties, Seller has obtained all such consents
on or before the Closing Date.
Seller has no debts, obligations or
liabilities, absolute, fixed, contingent or otherwise, of any nature whatsoever,
whether due or to become due (including unasserted claims), whether incurred
directly or by any predecessor thereto, and whether arising out of any condition
that occurred or existed on or before the Closing Date, whether or not then
known, due or payable. Schedule 4.7
identifies all of Seller’s creditors relating to the YM Business and Seller
represent and warrant that they have no debts, obligations or liabilities,
absolute, fixed, contingent or otherwise, of any nature whatsoever, whether due
or to become due to such creditors or otherwise, which such debt or obligation
would adversely affect the YM Business or the Assets or the sale thereof to
Buyer.
The operation of the YM Business is not
in violation of any law (including any environmental law), permit or license,
and no event has occurred or condition or state of facts exist which could give
rise t o any violation.
There exists no condition or state of
facts or circumstances involving Seller’s customers, suppliers, distributors or
sales representatives that Seller can reasonably foresee that could adversely
affect the YM Business or the Assets after the Closing Date.
Neither Seller nor any of its
respective officers, members or employees has employed any broker or finder or
incurred any liability for any brokerage fee, commission or finders’ fee in
connection with any of the transactions contemplated by this
Agreement. As of the date of this Agreement, Seller is not engaged,
directly or indirectly, in any discussions or negotiations with any other party
with respect to a proposal to acquire, in any manner, the Assets, the YM
Business or the capital stock of Seller.
None of the representations or
warranties of Seller contained in this Article 4 and none of the information
contained in the Schedules referred to in this Article 4 is false or misleading
in any material respect or omits to state a fact necessary to make the
statements in this Article 4 or in the Schedules to Article 4 not misleading in
any material respect.
The books
of account and related records of the Seller are complete and correct and have
been maintained in accordance with sound business practices and reflect in
detail its assets, liabilities, revenues, expenses, cash flows, and other
transactions. There has been delivered to Buyer the audited balance
sheets for the Seller at December 31, 2007, 2006 and 2005, and income statements
and statements of cash flows for the years then ended and the interim audited
balance sheet for the Seller at June 30, 2008, and income statement for the six
(6)-month period then ended (the “Financial
Statements”). The Financial Statements (i) are accurate,
correct and complete in accordance with the books of account and records of the
Seller, (ii) have been prepared in accordance with GAAP (except that the interim
statements do not reflect normal year-end adjustments) on a consistent basis
throughout the indicated periods, and (iii) fairly present, in all material
respects, the financial position of the Seller and the results of operations and
cash flows of the Seller at the dates and for the relevant periods
indicated.
Article
5.
Buyer represents and warrants to Seller
as follows:
Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of California. Buyer has full power and authority to operate,
own and lease its properties and carry on its business as now
conducted. Buyer has the absolute and unrestricted power, authority
and capacity to enter into this Agreement and any agreements related hereto to
which it is or is to become a party and perform its obligations under this
Agreement and such agreements contemplated hereby. Copies of the
operating agreement of Buyer, which have been delivered to Seller, are complete
and correct.
This Agreement and all agreements
contemplated hereby to which Buyer becomes a party, has been duly executed and
delivered by Buyer, and constitutes the legal, valid and binding obligations of
Buyer enforceable against it in accordance with their respective
terms. Each agreement contemplated hereby to which Buyer is to become
a party, when executed and delivered by Buyer, will constitute the legal, valid
and binding obligation of Buyer, enforceable against it in accordance with the
terms of such legal agreement. All agreements contemplated hereby to
which Buyer is or is to become a party have been duly and validly authorized by
all necessary limited liability company proceedings by Buyer.
Neither the execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby nor the
compliance with or fulfillment of the terms, conditions or provisions hereof by
Buyer will: (i) result in a breach of, constitute a default or an event of
default under any of the terms of, or give to any other person the right to
cause a termination of, any of the Assets or any other contract to which Buyer
is a party or by which its Assets may be bound, (ii) result in the creation,
maturation or acceleration of any liability of Buyer, (iii) violate any law or
violate any judgment or order of any governmental body to which Seller is
subject or by which any of the Assets may be bound or affected, or (iv) result
in the creation or imposition of any lien or encumbrance upon any of the Assets
or give to any other person any interest or right therein.
No action, suit, investigation, claim
or proceeding of any nature or kind whatsoever, whether civil, criminal or
administrative, by or before any governmental body or arbitrator is pending or,
to the knowledge of Buyer, threatened against or affecting Buyer that questions
the validity of this Agreement, or the right of Buyer to enter into this
Agreement or to consummate the transactions contemplated hereby, or wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would prevent
consummation of the transactions contemplated hereby or adversely affect the
Buyer’s performance under this Agreement.
Neither
Buyer nor any of its officers, members or employees has employed any broker or
finder or incurred any liability for any brokerage fee, commission or finders’
fee in connection with any of the transactions contemplated hereby.
Article
6.
Subject to the limitations set forth in
this Article 6, all representations, warranties, covenants and obligations made
by any party in this Agreement shall survive the Closing. Any
limitation or qualification set forth in any particular representation or
warranty in Article 4 or 5 shall not limit or qualify any other representation
or warranty in Article 4 or 5. The right to indemnification under
this Article 6 or any other remedy based on the breach or inaccuracy of any
representation or warranty in Articles 4 or 5, or breach of, or noncompliance
with, any covenant or obligation in this Agreement will not be affected by (a)
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the Closing
Date, with respect to any such representation, warranty covenant or obligation,
or (b) the expiration of any statute of limitations applicable to the underlying
claims against or applicable to the Damages incurred by the Indemnified
Party. The waiver by any party of any condition at Closing of the
breach or inaccuracy of any representation or warranty, or breach of, or
noncompliance with, any covenant or obligation, will not affect the right of
such party to indemnification, payment of damages or other remedy based on such
breach, inaccuracy or noncompliance.
Seller shall severally indemnify,
defend, save and hold harmless Buyer, its affiliates and their respective
officers, directors, employees, and agents (each, a “Buyer Indemnitee”) from and
against all Damages (collectively, “Buyer Damages”) directly or
indirectly asserted against, imposed upon, resulting to, or incurred or required
to be paid by any Buyer Indemnitee from or in connection with, (i) any breach or
inaccuracy of any representation or warranty made by Seller in this Agreement,
or in any certificate or document delivered by Seller in connection with this
Agreement or any other agreement to which Seller is or is to become a party; and
(ii) a breach or nonperformance of any covenant made or obligation undertaken by
Seller in or in connection with this Agreement or any other agreement to which
Seller is or is to become a party.
Buyer shall indemnify, defend, save and
hold harmless Seller and its officers, directors, employees, affiliates and
agents (each, a “Seller
Indemnitee”) from and against any and all Damages (collectively, “Seller Damages”) directly or
indirectly asserted against, imposed upon, resulting to, or incurred or required
to be paid by Seller Indemnitee from or in connection with, (i) any breach
or inaccuracy of any representation or warranty made by Buyer in this Agreement
or in any certificate or document delivered by Buyer in connection with this
Agreement or any other agreement to which Buyer is a party, and (ii) a
breach or nonperformance of any covenant made or obligation undertaken by Buyer
in or in connection with this Agreement or any other agreement to which Buyer is
or is to become a party.
If any Buyer Indemnitee or Seller
Indemnitee (an “Indemnified
Party”) believes that it has suffered or incurred any Buyer Damages or
Seller Damages, as the case may be (“Damages”) for which it is
entitled to indemnification under this Article 6, such Indemnified Party shall
so notify the party or parties from whom indemnification is being claimed (the
“Indemnifying Parties”)
with reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in
equity is instituted by or against a third party with respect to which any
Indemnified Party intends to claim any Damages, such Indemnified Party shall
promptly notify the Indemnifying Parties of such action or suit. The
failure of an Indemnified Party to give any notice required by this
Section 6.4 shall not affect any of such party’s rights under this
Article 6 except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
The
Indemnified Party shall have the right to conduct and control, through counsel
of its choosing and reasonably acceptable to the Indemnifying Parties, any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same; provided, that the
Indemnified Party shall give the Indemnifying Parties advance notice of any
proposed compromise or settlement; provided, further, that the
Indemnified Party obtains the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. The Indemnified Party shall
permit the Indemnifying Parties to participate in the defense of any such action
or suit through counsel chosen by them, provided that the fees and expenses of
such counsel shall be borne by the Indemnifying Parties. If the
Indemnifying Parties undertake, conduct and control the conduct and settlement
of such action or suit, (i) the Indemnifying Parties shall not thereby permit to
exist any lien, encumbrance or other adverse charge upon any asset of the
Indemnified Party; (ii) the Indemnifying Parties shall not consent to any
settlement that does not include as an unconditional term thereof the giving of
a complete release from liability with respect to such action or suit to the
Indemnified Party; (iii) the Indemnifying Parties shall permit the Indemnified
Party to participate in (but not control) such conduct or settlement, at the
Indemnified Party’s sole expense, through counsel chosen by the Indemnified
Party; (iv) the Indemnifying Parties shall agree promptly to reimburse the
Indemnified Party for the full amount of any Damages including fees and expenses
of counsel for the Indemnified Party incurred after giving the foregoing notice
to the Indemnifying Parties and prior to the assumption of the conduct and
control of such action or suit by the Indemnifying Parties. If the
Indemnified Party conducts and controls any such claim, action or suit, clauses
(i) through (iii) of the preceding sentence of this Section 6.5 shall apply for
the benefit of the Indemnifying Party. In the event of dispute or
disagreement between the Indemnified Party and the Indemnifying Parties with
respect to the proposed compromise or settlement of any third party claim,
action or suit which is subject to indemnification pursuant to this Article 6,
such dispute or disagreement shall be subject to binding arbitration in San
Francisco County, California, under the then-prevailing rules and procedures of
the American Arbitration Association and the laws of the State of
California.
Article
7.
Buyer and
Seller shall each pay its respective legal and other transactional fees and
expenses incurred by or on behalf of it in connection with this Agreement and
the transactions contemplated hereby. All brokerage fees, transfer
taxes, all applicable sales, income, or use taxes in connection with the
conveyance of the Assets to Buyer and to effect the other transactions
contemplated hereby shall be borne by Seller.
After the Closing, without further
consideration, Seller shall take or cause to be taken such actions (including
the execution, acknowledgment and deliver of instruments, documents, transfers
and assurances) as Buyer may reasonably request for the better conveying,
transferring, assigning and delivering of the Assets to Buyer.
All notices given or made in connection
with this Agreement shall be in writing. Delivery of written notices
shall be effective upon receipt. All deliveries shall be made to the
following addresses:
(i)
if to Buyer, to:
|
Xxxxxx
X. Xxxxx
|
|
Java
NorCal LLC
|
|
000
00xx
Xxxxxx
|
|
Xxx
Xxxxxxxxx, XX 00000
|
|
with
a required copy to:
|
The
Goralka Law Firm
0000
Xxxxxxxx Xxxxx
Xxxxxxxxxx,
XX 00000
Attn: Xxxx X. Xxxxxxx,
Esq.
Facsimile:
(000)
000-0000
(ii) if
to Seller:
|
JDCO,
Inc.
|
|
0000
Xxxxxx Xxxxxx
|
|
Xxxxx
000
|
|
Xxx
Xxxxxxxxx, XX 00000
|
|
Attn: Xxxxxxx
Xxxxxxxxx
|
|
with
a required copy to:
|
|
Sichenzia,
Ross, Xxxxxxxx & Xxxxxxx
|
|
00
Xxxxxxxx, 00xx
Xxxxx
|
|
Xxx
Xxxx, XX 00000
|
|
Attn: Xxxxx
Xxxxxxxx, Esq.
|
|
Facsimile: (000)
000-0000
|
Any party
may change the address to which notice (or copies) to it shall be addressed by
giving notice of that change to the other parties in accordance with this
Section.
This Agreement and all the rights and
powers granted by this Agreement shall bind and inure to the benefit of the
parties and their respective successors and permitted assigns. This
Agreement and the rights, interests and obligations under this Agreement may not
be assigned by operation of law or otherwise by any party without the prior
written consent of the other parties; provided that Buyer may assign this
Agreement and its rights, interests or obligations hereunder to any affiliate of
Buyer.
The parties acknowledge the mutual
receipt and sufficiency of valuable consideration for the formation of the
legally binding contract represented by this Agreement. The
consideration includes all of the representations, warranties, covenants and
obligations contained in this Agreement. The recitals set forth on
page one of this Agreement are incorporated into this Agreement and made a part
of this Agreement. Except with respect to injunctive relief, for any
disputes arising between the parties in connection with this Agreement and the
transactions contemplated hereby, the parties shall make a good faith effort to
reach an amicable resolution for a period of thirty (30) days. Any
dispute arising from or related to this Agreement and the transactions
contemplated hereby shall be decided by a court of law in the State of
California in San Francisco County or the District Court of the United States,
Northern District of California without regard to venue, forum nonconveniens or
personal jurisdiction issues, all challenges to which are hereby
waived. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to its
conflict of law doctrines.
Any item disclosed on any Schedule to
this Agreement shall only be deemed to be disclosed in connection with (i) the
specific representation and warranty to which such Schedule is expressly
referenced, (ii) any specific representation and warranty which expressly
cross-references such Schedule and (iii) any specific representation and
warranty to which any other Schedule to this Agreement is expressly referenced
if such other Schedule expressly cross-references such Schedule.
To be effective, any amendment or
waiver under this Agreement must be in writing and signed by the parties
hereto. Neither the failure of any party to exercise any right, power
or remedy provided under this Agreement or to insist upon compliance by any
other party with its obligations under this Agreement, nor any custom or
practice of the parties at variance with the terms of this Agreement, shall
constitute a waiver by such party of its right to exercise any such right, power
or remedy or to demand such compliance. The rights and remedies of
the parties are cumulative and not exclusive of the rights and remedies that
they otherwise might have now or hereafter at law, in equity, by statute or
otherwise.
This Agreement and the Schedules and
Exhibits set forth all of the promises, covenants, agreements, conditions and
undertakings between the parties with respect to the subject matter of this
Agreement. This Agreement supersedes all prior or contemporaneous
agreements and understandings, negotiations, inducements or conditions, express
or implied, oral or written, among the parties. Except for the
provisions of Sections 6.2 and 6.3 relating to Buyer Indemnitees and Seller
Indemnitees, this Agreement is not intended to confer upon any person other than
the parties any rights or remedies under this Agreement.
If any term or other provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced under any applicable legal requirement in any
particular respect or under any particular circumstances, then, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party, (a) such term or
provision shall nevertheless remain in full force and effect in all other
respects and under all other circumstances, and (b) all other terms, conditions
and provisions of this Agreement shall remain in full force and
effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner so that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original but all of
which together shall be deemed to be one and the same instrument.
7.11 Sales and Transfer
Taxes.
Seller shall pay all sales, use and
transfer taxes arising from the transfer of assets described in this
Agreement. Seller shall pay its portion, prorated as of the closing
date, of the personal property taxes of the Business.
If a
dispute arises between any of the parties hereto arising from, relating to or in
connection with this Agreement (“Dispute”), the parties hereto
agree that the Dispute shall be submitted to mandatory, good-faith
mediation. The mediation must be held within thirty (30) calendar
days after the appointment of a mediator on a mutually agreeable date, or on a
date ordered by the mediator. Any statute of limitations applicable
to any such Dispute shall be tolled for the period beginning on the date
mediation is requested until ten (10) calendar days after termination of the
mediation. Evidence of anything said, any admissions made, and any
documents prepared in the course of the mediation shall not be admissible in
evidence or subject to discovery in any arbitration or court action pursuant to
Evidence Code Section 1152.5. The mediator shall be mutually agreed
upon by the parties hereto, or, if the parties hereto are unable to agree upon a
mediator within ten (10) calendar days after a request for mediation delivered
to a party hereto, a request may be made by any party hereto to the American
Arbitration Association to appoint a mediator. The mediation shall be
conducted in accordance with such rules as the parties hereto agree upon, or in
the absence of agreement, in accordance with the Commercial Mediation Rules and
Procedures of the American Arbitration Association. The mediation
shall take place in San Francisco County, California. The cost of
mediation (including the mediator’s fees and costs) shall be split equally
between the Buyer on one hand and the Seller on the other hand, but each party
hereto shall bear its own attorneys’ fees and costs, unless agreed
otherwise. Subject to the provisions of Section 7.__ of this
Agreement, any Dispute that is not resolved by mediation shall be heard by
judicial reference pursuant to the provisions of California Code of Civil
Procedure Sections 638 through 645.2, inclusive.
[Remainder
of Page Intentionally Left Blank]
The parties, each intending to be
legally bound by this Agreement, have executed this Agreement as of the first
date identified in the first sentence of this Agreement.
|
JDCO,
INC.
|
By:
_____________________________
|
||
|
Name:_____________________________
|
|
Title:
______________________________
|
|
JAVA
NORCAL, LLC
|
|
By:
______________________________
|
|
Name:______________________________
|
|
Title:
______________________________
|